Crude oil and gold may rise on improving risk appetite and swelling anti-fiat demand if ECB President Mario Draghi hints the bank is aiming to expand stimulus.

Talking Points

• Crude Oil and Copper May Advance if ECB Hits at Stimulus, Lifting Sentiment

• Gold, Silver to Find Support in Anti-Fiat Demand if ECB Rhetoric Turns Dovish

Commodities are treading water in European trade as investors wait for a clear-cut directional catalyst to emerge. The spark may come from the European Central Bank as it delivers its monthly policy announcement.

The central bank is expected to remain on hold this time around, but PMI data suggests recession deepened in the currency bloc in February and has fed some speculation about an easing of monetary policy to offset the de-facto tightening produced by 3-year LTRO repayments.

The ECB seems unlikely to act against a backdrop rising sovereign risk however, claiming once again that swelling risk premiums priced into bond yields undermine policy transmission. Recent political jitters in Italy have seen yields on the country’s benchmark 10-year note trend higher, hinting the bank may prefer to remain on the sidelines until a concrete government in Rome emerges and funding stress unwinds.

That shifts the spotlight to ECB President Mario Draghi’s press conference following the announcement. Clues hinting at imminent easing in the months ahead may boost risk appetite amid hopes of a much-needed lifeline to be offered to the world’s second-largest economy, boosting risk appetite and lifting cycle-sensitive crude oil and copper prices. Gold and silver may likewise find support in such a scenario as a dovish shift at yet another major central bank boosts global demand for anti-fiat assets.

WTI Crude Oil (NY Close): $90.43 // -0.39 // -0.43%

Prices continue to consolidate below resistance at 91.13, the 50% Fibonacci retracement. A break above this barrier targets the 38.2 % level at 92.80. Near-term support is at 89.45, the 61.8% Fib, with a drop below that aiming for the 76.4% retracement at 87.38.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1583.90 // +8.40 // +0.53%

Prices mounted a shallow recovery from support at 1570.37, the 38.2% Fibonacci expansion. Near-term resistance is at 1589.36, the 23.6% level, with a break above that aiming for the February 26 high at 1620.09. Alternatively, a break downward initially aims for the 61.8% Fib at 1554.62.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $29.06 // +0.36 // +1.26%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. Near-term resistance is in the 29.42-92 area, with a break higher exposing a falling trend line now at 30.86. Alternatively, a reversal below support targets the 38.2% level at 27.86.